Like many food retailers operating amid this macro backdrop of recession risk, persistent inflation and higher food-at-home sales, Walmart, which operates 5,342 locations in the United States, was optimistic yet cautious when it reported strong fourth-quarter and fiscal 2023 earnings. Walmart’s U.S. division posted net sales of $113.7 billion, an 8.5% increase year over year. U.S. same-store sales rose 8.3% as the company continued to gain market share in grocery, especially among higher-income shoppers looking to save money. Specifically, the retailer said that strength in food sales (up by high teens) reflected continued market share gains and ongoing growth in private-brand penetration; grocery sales increased by low-20s percentages on a two-year stack. Food units sold increased year over year; transactions and baskets were higher, too. Walmart is attracting more shoppers of more income levels than ever before, thanks to its value prop promising better prices and more convenience options — such as membership, pickup and delivery — than traditional grocers and discounters.
“One of the things I’ve always appreciated about this company is that it’s naturally hedged,” McMillon said on the call. “If customers want more of something and less of something else, we shift our inventory. If the economy is strong, our customers have more money. If things are tougher, they come to us for value. With today’s inflation, we’re continuing to see that happen. We’re gaining share across income cohorts, including at the higher end, which made up nearly half of the gains we saw in the U.S.”
A lot of those higher-end shoppers love Walmart’s online grocery offering. Walmart now has more than 4,600 pickup locations and more than 3,500 same-day delivery locations across the United States. The company also has 157 distribution facilities, plus 31 dedicated e-commerce fulfillment centers. This month, Walmart revealed a revamp of its home page on desktop and mobile, with a customer-centric and curated storefront on walmart.com and the Walmart app so that customers can easily find what they need and be inspired to shop more of the hundreds of millions of items in the retailer’s online assortment.
“When we think about our business today, compared to what it was during prior economic downturns, we now have a more compelling offer, a true omnichannel experience that makes us optimistic that more higher-income families will continue shopping with us across categories because we have pickup, delivery and membership,” McMillon said.
Ainoa also reiterated the value of Walmart’s Roku partnership.
“With TV advertising, you can’t really actually ever measure truly what your results are,” she said. “With our T-commerce partnership with Roku, we have direct information. We know exactly how many times it was shown, we can map it back to the actual purchases, who cares about purchasing through that channel, who also then did certain things online, who also made a booking through other ways. We can give a real look at the customer and give them an experience that matches how they want to find things, who they want to give confidence and who they want to connect with to give them confidence in buying, and give it to them how they want to get it.”
Toscano meanwhile weighed in on Walmart’s exploding social commerce business.
“Three hundred and two million Americans are spending over two hours a day on social platforms,” she said. “That is a tremendous amount of attention that they’re giving these networks.” Toscano noted that the retailer’s social commerce strategy includes re-evaluating where product discovery is now happening. “Product discovery doesn’t happen in just the aisles and in search anymore,” she continued, listing some of the things that Walmart is doing in this space, including the partnership with Roku that’s generating “some really surprising results that we’re looking to scale.”
Toscano said Walmart is also focused on livestreams and monetizing content with its new Creator platform. All initiatives are designed to measure the impact of marketing and media investments. “ROAS [return on ad spend] is not the single source of truth anymore,” she said. “It is an important metric, but it is not the [only] metric. We think about high-value actions in addition to ROAS. We think about customer lifetime value, we think about contribution profit, [and we] think about how our investments at the top of the funnel impact the performance.” Walmart’s push into revenue streams such as media, advertising and fulfillment services is a harbinger for what this year is bound to bring in the grocery industry: a period in which everyone will be looking to improve omnichannel profitability.